Xerox Corporation Splits In Two: What You Need To Know

Like Hewlett-Packard did last year, Xerox Corp (XRX – Analyst Report) announced on Friday that it will split into two companies in an effort to try and turn its business around. Here’s what you need to know.

Two separate companies

One of the new companies will hold Xerox’s premier printer operations, while the other company will contain its business process outsourcing unit.

The new companies’ value

The document technology company will be worth $11 billion, while the services company will hold a value of $7 billion.

Deal completion

The Xerox deal is expected to be completed by the end of this year.

Carl Icahn will play a major role

Activist investor Carl Icahn, who first revealed his stake in Xerox last November, will receive three board seats in the company that specializes in outsourcing. He holds more than 8% in the company. Icahn said he would push for operational changes, and will select three directors to fill his given board seats.

In an interview with “Bloomberg Go,” CEO Ursula Burns said that Icahn “will have governance input into the services business and will not be engaged with the services business or the current Xerox business at all.”

She added, “We came out in a place that’s strong for the business, and it happened to align with what Mr. Icahn wanted as well.”

Costs will be cut

The company split will help Xerox make needed cost cuts, delivering $2.4 billion in savings over the next three years; $700 million is expected to be saved this year alone.

Possibility of acquisition

Burns acknowledged that if any buying interest were to be presented, Xerox’s board and executive would make sure to speak to any person who is interested. “They are both strong and both large companies. But this would not be a small buy at $11 billion and $7 billion,” she said.

Names and leadership are still TBD

The names for the new companies, as well as new leadership, have yet to be determined. Look for these announcements in the coming weeks.